For Ericsson in court there was a “Motive”

The Yekaterinburg-2000 company, which provides cellular communication services under the Motiv brand, has filed a lawsuit against Ericsson Corporation, the main Russian legal entity of the Swedish vendor Ericsson, follows from the filing cabinet of arbitration cases. At the end of April, the Moscow Arbitration Court appointed the case for consideration, the first meeting on it should be held in early July. As a representative of Ekaterinburg-2000 explained to RBC, the company used the equipment of this manufacturer when building its communication network and had a long-term technical support contract.

“Ericsson, referring to European sanctions, unilaterally refused to fulfill the contract,” the representative said in response to a question about the nature of the claims against the Swedish company. He declined to discuss other details of the case.

Ericsson immediately after the start of a special military operation in Ukraine announced the suspension of supplies to Russia, and in mid-spring suspended business in the country for an indefinite period. At the same time, the company announced that it had opened a reserve account for 0.9 billion Swedish kronor (about $95 million) in case of asset impairment and other “exceptional expenses”. Employees of the local office were sent on paid leave. In mid-summer, the head of the vendor, Börje Ekholm, said that the suspension had cost the company 1.2 billion Swedish kronor ($113 million). In August, the head office began laying off local employees, notifying that it decided to leave Russia before the end of the year.

At the end of 2022, Ericsson announced that 400 of its employees in Russia were laid off or left the company. At the same time, she reported that the Swedish authorities provided the company with exemptions from sanctions so that the vendor could provide technical assistance and software for civil public telecommunications networks, but this was valid only until the end of last year.

Nevertheless, the Ericsson Corporation legal entity continues to exist. At the end of 2022, its revenue decreased by 42.2% compared to the previous year, to RUB 2.86 billion. The company received a net loss of 2.35 billion rubles. instead of net profit of 533.6 million rubles. a year before.

An Ericsson spokesperson told RBC that the company “completed operations in Russia by the end of 2022 in accordance with applicable sanctions.” “Ericsson does not supply any products to mobile operators or other customers in Russia. The legal entity owned by Ericsson will continue to be registered in Russia to complete the administrative requirements,” he explained. Ericsson Corporation, he said, has a few employees left.

How operators sue equipment manufacturers

Yekaterinburg-2000 is not the only mobile operator that is suing Ericsson. In November last year, a lawsuit against the Russian legal entity of the vendor, as well as against Satel TVK, which installs equipment, was filed by T2 Mobile, a subsidiary of T2 RTK Holding (operating under the Tele2 brand). But this operator is trying to oblige the companies to supply equipment under a framework agreement dated July 30, 2014 and pay a penalty in the amount of more than €4.1 million. The next meeting in this case is due in June.

T2 Mobile, as well as Tattelecom (provides cellular services in Tatarstan under the Fly brand) are suing the Russian legal entity of another major global telecommunications equipment manufacturer, Nokia Solutions and Networks. T2 Mobile demanded that the company pay a penalty under several contracts concluded in previous years in the amount of €7.26 million and $2.6 thousand, but in April withdrew the claim. Tattelecom tried to collect about €32 thousand, but at the beginning of the year withdrew the claim.

A representative of T2 RTK Holding declined to comment. Representatives of other major Russian mobile operators – MTS, MegaFon and VimpelCom (Beeline brand) did the same.

As Yury Fedyukin, managing partner of the law firm Enterprise Legal Solutions, explained to RBC, the law provides that one of the parties to an agreement that governs the legal relations of the parties may, by default, unilaterally refuse to execute it as a result of gross violations by the counterparty (refusal to pay for the delivered goods or services). if force majeure circumstances have arisen, etc.). Usually, the parties, before concluding a contract, prescribe a list of such circumstances. “If one of the parties decides to withdraw from the contract before its expiration and / or without fulfilling its obligations under it, referring to circumstances that are not provided for in it, by default this party faces the risk of applying sanctions to it – a fine or a penalty . It is usually assumed that the parties resolve the conflict out of court, so if a lawsuit is filed, it means that they could not agree on their own, ”Fedyukin said. The outcome of the litigation, he said, will depend on what was written in the contract. “I will assume that the Russian court does not recognize the existence of sanctions risks for the parent European company as sufficient grounds for refusal to fulfill contractual obligations by the legal entity registered in Russia, which is the defendant in this case,” he said. Given that the company that announced its withdrawal from the country is likely to liquidate the legal entity in the foreseeable future, some of the claims, according to Fedyukin, can be satisfied in the process of liquidation, but in the future, debt collection will be difficult. Ericsson, like most other foreign companies operating in Russia, “caught between a rock and a hard place”: if the contracts are executed, there are risks of sanctions in the EU, if not, already in Russia, the expert noted.

“The position of the Russian legislator and the court on such claims is transparent and unambiguous: since the sanctions of Western jurisdictions, introduced since 2014, are considered by Russia as illegal, following them on the territory of the country is contrary to its public policy, and referring to them as a force majeure circumstance is groundless. Therefore, the court can and, most likely, will oblige the defendant – Ericsson Corporation – to fulfill the requirements of the plaintiff, ”said Anton Imennov, Senior Partner at Pen & Paper Bar Association. In his opinion, if the plaintiff’s claims are of a monetary nature, he has a high chance of enforcing the court’s decision by, for example, seizing bank accounts that still exist with the Russian division of Ericsson. At the same time, he noted that given that the EU legislation does not restrict the competent authorities in the ability to issue permission to continue the provision of services for humanitarian purposes, for critical infrastructure, etc., it can be concluded that either Ericsson could not reasonably convince regulator to extend the previously issued permit, or did not try. He admitted that the company simply did not want to do this, since the main reason for the refusal of Russian clients could be related to the assessment of business risks.